Investors calling Time on AOL

Struggling internet company AOL is pleading for patience from investors, insisting that online advertising revenues will pick up in the next two years.

Time Warner laboured over the decision to untangle themselves from the lead weight of AOL, but finally decided to jettison the company in February. Nine years ago, the two companies made the “deal of the century” with a merger that saw AOL takeover Time Warner for $160 billion.

It didn’t take long for the deal to go sour. The “transformed landscape” of digital media quickly turned into a quagmire, with AOL failing to move with the changing trends, crucially missing out on the broadband explosion and early movers who made the most out of the emerging internet advertising movement.

As subscribers dropped by two thirds, AOL shrivelled into virtual insignificance. The company changed its business model to focus on digital marketing but by then they had lost the edge of being on the frontier, and were playing catch up with the likes of Google and Yahoo. In the last three quarters, AOL’s revenue took a 20 per cent nose dive, hastening Time Warner’s decision to ditch its partner.

AOL’s chief executive Tim Armstrong told investors that AOL will make a comeback in the advertising market as the industry bounces back from the recession. “Advertisers are going to be driving to Internet Road and AOL is a major property on Internet Road,” Mr Armstrong told Reuters. The new look AOL will be pure display advertising, but with the frontier moving again to SEO, AOL could once again be caught one step behind its competitors.